Third National Bank v. Lanahan

Bryan, J., delivered the opinion of the Court. The material facts of this case lie within a very narrow compass. R. W. L. Rasin as the general.partner of the firm of R. W. L. Rasin & Co. made an assignment for the benefit of his creditors, both individual and partnership. The assignment embraced all the property of the firm and all the separate property of the grantor.

The Third National Bank was a creditor of the firm. A portion of this indebtedness arose in this way: E. K. Cooper, known as a special partner of the firm, executed five promissory notes of five thousand dollars each payable to the order of R. W. L. Rasin & Co. These notes were secured by a pledge of certain other notes belonging to the partnership, and which were owing from its debtors. They were delivered to the Bank, together with the collateral securities, and by it discounted after they had been endorsed in the firm name. After the execution of the assignment, judgments were obtained by the Bank on these notes and on other causes ⁴⁶⁷ of action against Rasin, trading as R. W. L. Rasin & Co. By due proceedings the Circuit Court of Baltimore" City has assumed administration of the trust estate, which is not sufficient to pay the creditors.

The Bank has filed its claim with the auditor for payment out of the assets in the hands of the trustee. Before the filing of the claim, it had collected a large sum from the collaterals pledged do secure the discounted notes. It contends that it is entitled to a dividend on the full amount of the indebtedness without deducting the sum received from the col-laterals; admitting, however, that this dividend must not exceed the amount due, when added to the sum already paid. The Circuit Court is administering the trust according to the terms of the deed.

It seems to us, therefore, that the distribution must he made according to these terms. The trustee is required to pay all the partnership creditors in full if the partnership assets are sufficient, and, “if not, then ratably and equally according to their respective amounts.” It cannot he denied that the sum received from the collaterals diminished the indebtedness ■of the partnership. We do not perceive how any question in respect to the marshalling of assets can arise. It is simply the case where a portion of a debt is paid by property of the debtor which had been pledged to secure its payment.

The question is not whether the other creditors ■can compel the Bank to seek payment from the collaterals before claiming distribution from the trust fund. The Bank has actually received payment to a certain extent. The portion remaining unpaid is an ordinary debt reduced to judgment. It has no priorities over other judgments •of the same date.

It can have no superior claim against the debtor by reason of the fact that a portion of it has been paid by the proceeds of property specially pledged. The same means of enforcing payment against the judgment debtor are open to the Bank as belong to ⁴⁶⁸ any other judgment creditor, hut none other or greater. How, the trustee is hound to pay “ ratably and equally, according to their respective amounts,” such debts as the grantor was bound to pay. He has no power to pay any debt which the grantor does not owe; nor can ho pay one creditor a larger dividend than he pays to another.

If one creditor has a lien, or a priority at law or in equity, of course he must be paid according to